Limited Duration Shareholder Rights Agreement

A shareholder rights plan, commonly referred to as a “poison pill,” is a kind of defensive tactic used by a company`s board of directors against an acquisition. While the decision to implement a shareholder rights plan will be specific on a case-by-case basis, more and more companies have recognized, in recent months, the advantage of either adopting a rights plan or having one “on the shelf” so that it can be adopted in a timely manner and “taken out of the bar” in appropriate circumstances. The purpose of a shareholder rights plan is to compel a bidder to negotiate with the board of directors of the target company and not directly with the shareholders. The impact is twofold:[9] “Cubic`s Board of Directors strives to create long-term value and ensure that our shareholders are able to realize the full potential of their investment in the company,” said David F. Melcher, Cubic`s Independent Director. “The adoption of the rights plan must enable the Board of Directors to make informed decisions and prevent third parties from taking control of Cubic in a manner and price that is not in the best interests of Cubic shareholders.” In March 2020, due to the recent drop in prices, more companies adopted shareholder rights plans than any other month in recent years. The companies that bought them operate in a large number of sectors. The strengths of the recently adopted shareholder rights plans are as follows: as the COVID-19 pandemic continues to drive down stock prices, investment bankers have begun recommending that listed companies adopt shareholder rights plans in order to prevent strategic buyers and private equity firms from acquiring them at a low price, that is, at prices that do not reflect their intrinsic long-term value. . . .